Working Capital For Healthcare Professionals And Dentists


Are you a dental professional of health care provider that is in dire need of working capital?

The simple solution today might just be a credit market that could be accounts receiving factoring.

Until recently, however, individual dentists, doctors and physician groups could easily go to their local banks to get all the working capital they would have needed. But while banks still loan money for that very purpose, getting a line of credit or loan itself might be an uphill battle for many individuals.

The credit nightmares of current time has caused a major tightening in underwriting parameters at our banks all across the country. Banks normally require a credit score of 690 minimum, the practice must have track record of profitability, and also start- ups are excluded. Businesses who would have easily qualified for a line of credit six months ago are now getting turned down.

The main problems of a typical bank load are: it creates debt on which you pay long term interest at very high rates, a low credit score would typically lock you out of a qualifying loan, and it often requires a personal guarantee and possibly additional collateral.

Factoring in is an excellent way of acquiring needed cash flow. Medical receivables factoring is the business by which buying third party accounts receivable at a discount so as to make a profit from collecting them. There are also very positive differences between banks loans and factoring and below we shall take a look at some of them.

- First of all factoring is not necessarily a loan. It is an off balance sheet transaction so the factoring fees are a deductible expense.

- Personal guarantees are not required, as they are with a traditional bank loan.

- Funds an be received within a week of applying usually, provided all documents are received in great working order.

- With factoring, additional collateral is not required to be pledged.

- Funding is only limited by the company's pool of receivables, as opposed to the bank's financing, which usually loans a maximum amount of funding.

- The credit of the business or its owners is not of major importance to the company that is doing the factoring. When factoring, the funding is limited by only the amount of the third party receivables the professional has on its books.

Third party receivables are usually the amounts due from insurance companies like the Blue Cross and by governmental programs such as Medicaid and Medicare. With medical invoice factoring, the healthcare provider is the one that's responsible for submitting the batch of invoices to the company that's responsible for factoring and receives an advance at a rate that is determined by the contract itself.

The advance rate is typically 70- 90% of the total estimated net collective value of invoices. The remaining amount, which is the reserve, is then remitted back to the provider upon collection, minus the factoring fee.

Are you a healthcare provider or dentist in need of an influx of working capital? Referring the best resources for medical receivables factoring is just one of the many money management strategies that you can use to achieve your financial goals and build wealth for your long term financial freedom.